Crown Holdings Reports Fourth Quarter 2012 Results

PHILADELPHIA, Jan. 30, 2013 /PRNewswire/ -- Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the fourth quarter and year ended December 31, 2012.

2012 Highlights

Full Year

• Income per diluted share $3.75; Before Certain Items $2.81
• Free Cash Flow $345 million
• 3.5 billion units of annualized beverage can capacity added in growth markets
• Global beverage can unit volume grows 5%
• 7.0 million shares repurchased

Fourth Quarter

• Income per diluted share $0.20; Before Certain Items $0.51
• Acquisition of Superior Multi-Packaging completed
• Acquisition of Vietnamese beverage can and end plant completed

Net sales in the fourth quarter were $2,037 million compared to $2,058 million in the fourth quarter of 2011, primarily due to the pass through of lower material costs.

Fourth quarter gross profit was $281 million compared to $289 million in the 2011 fourth quarter and included an increase of $2 million from foreign currency translation.

Fourth quarter selling and administrative expense was $94 million compared to $97 million in the prior year quarter.

Segment income (a non-GAAP measure defined by the Company as gross profit less selling and administrative expense) was $187 million in the fourth quarter compared to $192 million in the fourth quarter of 2011 including an increase of $2 million from foreign currency translation. Segment income was 9.2% of net sales compared to 9.3% in the fourth quarter of 2011.

Commenting on the quarter, John W. Conway, Chairman and Chief Executive Officer, stated, "While European economic conditions remain challenging, net income per share before certain items and free cash flow performance met or exceeded the prior year.

"We look confidently ahead to 2013 and expect higher free cash flow, increasing productivity and contribution from our 2012 beverage can capacity additions, and the realization of benefits from our recent restructuring actions in Europe to continue to create increasing shareholder value," Mr. Conway said.

Net interest cost (interest expense less interest income) in the fourth quarter was $54 million compared to $55 million in the fourth quarter of 2011.

During the fourth quarter of 2012, the Company recorded charges of $38 million ($29 million, net of tax, or $0.20 per diluted share) for restructuring actions primarily in the Company's European division operations. The actions are expected to occur throughout 2013 with a portion of the anticipated benefit accruing to the Company beginning in the second half of 2013.

The Company also recorded a charge of $35 million ($23 million, net of tax, or $0.16 per diluted share) to increase its asbestos litigation reserve. Asbestos related payments totaled $28 million in both 2012 and 2011, and the Company expects 2013 payments to be similar to prior years' levels.

Net income attributable to Crown Holdings in the fourth quarter increased to $29 million, or $0.20 per diluted share, compared to $8 million, or $0.05 per diluted share, in the fourth quarter last year. Before certain items, net income increased to $74 million over the $73 million in the 2011 fourth quarter; and earnings per diluted share attributable to Crown Holdings improved to $0.51 over the $0.48 in the same quarter last year.

A reconciliation from net income and income per diluted share to net income before certain items and income per diluted share before certain items is provided below.

Twelve Month Results
For the full year, net sales were $8,470 million compared to $8,644 million in 2011, reflecting $243 million of unfavorable foreign currency translation and the pass through of lower material costs, partially offset by 5% growth in global beverage can volumes.

Gross profit for 2012 was $1,277 million compared to $1,348 million in 2011 and includes inventory holding gains that did not recur in 2012 and $31 million of unfavorable foreign currency translation.

Selling and administrative expense for 2012 was $382 million compared to $395 million for 2011 reflecting a decrease of $10 million in foreign currency translation.

Segment income in 2012 was $895 million compared to $953 million in 2011. The decrease in 2012 was primarily due to 2011 inventory holding gains not recurring in 2012, $21 million of unfavorable currency translation and reduced profits in the Company's European three-piece steel packaging businesses.

Net interest cost (interest expense less interest income) in 2012 was $219 million compared to $221 million in 2011, and includes a $4 million decrease from foreign currency translation.

Net income attributable to Crown Holdings for 2012 was $557 million, or $3.75 per diluted share, compared to $282 million, or $1.83 per diluted share, in 2011. Before certain items, net income was $417 million compared to $433 million in 2011 and earnings per diluted share before certain items was $2.81 in both 2012 and 2011.

During 2012, the Company repurchased 7.0 million shares of Company common stock including 1.3 million shares repurchased in the open market during the fourth quarter.

Net debt at December 31, 2012 was $3,315 million compared to $3,190 million at December 31, 2011. The increase in net indebtedness includes $106 million related to acquisitions completed during 2012, including $28 million of acquired debt, and $31 million from foreign currency translation.

During the fourth quarter of 2012, the Company acquired an aluminum beverage can and end production facility in Dong Nai Province, Vietnam and also acquired a controlling interest in Superior Multi-Packaging Ltd. (SMP), a listed company on the Singapore Exchange. The acquired Dong Nai facility, which has one beverage can and two beverage end lines, is located northeast of Ho Chi Minh City and will be combined with Crown's existing Dong Nai facility, which is adjacent to the acquired site. SMP, with annual sales of approximately $130 million, primarily produces metal and plastic containers for the paint, chemical, petrochemical, marine and edible oil industries at its facilities in Singapore, China and Vietnam. The acquisition of the controlling interest in SMP was made by an indirect 55% owned subsidiary of the Company.

As previously announced in January 2013, the Company issued $1 billion of 4.5% senior unsecured notes due 2023 and initially used the proceeds to repay $500 million of indebtedness under the Company's senior secured term loan facilities and to pay related fees and expenses. On February 2, 2013 the Company expects to complete the previously announced redemption of its outstanding $400 million 7.625% senior secured notes due 2017 and pay associated redemption premiums on those notes. The Company expects to incur a pre-tax charge of approximately $32 million in connection with the redemption premiums and write-off of deferred financing fees.

Non-GAAP Measures
Segment income and free cash flow are not defined terms under U.S. generally accepted accounting principles (non-GAAP measures). In addition, the information presented regarding net income before certain items and income before certain items per diluted share does not conform to U.S. GAAP and includes non-GAAP measures. Non-GAAP measures should not be considered in isolation or as a substitute for net income, income per diluted share or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to calculations of similarly titled measures by other companies.

The Company views segment income and free cash flow as the principal measures of performance of its operations and for the allocation of resources. Free cash flow has certain limitations, however, including that it does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure. The amount of mandatory versus discretionary expenditures can vary significantly between periods. The Company believes that net income before certain items and income before certain items per diluted share can be used to evaluate the Company's operations. Segment income, free cash flow, net income before certain items and income before certain items per diluted share are derived from the Company's Consolidated Statements of Operations and Cash Flows and Consolidated Balance Sheets, as applicable, and reconciliations to segment income, free cash flow, net income before certain items and income before certain items per diluted share can be found within this release.

Conference Call
The Company will hold a conference call tomorrow, January 31, 2013 at 9:00 a.m. (EST) to discuss this news release. Forward-looking and other material information may be discussed on the conference call. The dial-in numbers for the conference call are (415) 228-5025 or toll-free (800) 475-0233 and the access password is "packaging." A live webcast of the call will be made available to the public on the internet at the Company's web site, www.crowncork.com. A replay of the conference call will be available for a one-week period ending at midnight on February 7. The telephone numbers for the replay are (203) 369-0572 or toll free (866) 403-7100.

Cautionary Note Regarding Forward-Looking Statements
Except for historical information, all other information in this press release consists of forward-looking statements. These forward-looking statements involve a number of risks, uncertainties and other factors, including the Company's ability to improve its free cash flow, increase productivity and realize benefits from its recent beverage can capacity additions, generate cost savings and other benefits from restructuring actions, the magnitude of future payments for asbestos litigation and the successful redemption of its outstanding $400 million senior secured notes that may cause actual results to be materially different from those expressed or implied in the forward-looking statements. Important factors that could cause the statements made in this press release or the actual results of operations or financial condition of the Company to differ are discussed under the caption "Forward-Looking Statements" in the Company's Form 10-K Annual Report for the year ended December 31, 2011 and in subsequent filings made prior to or after the date hereof. The Company does not intend to review or revise any particular forward-looking statement in light of future events.

Crown Holdings, Inc., through its subsidiaries, is a leading supplier of packaging products to consumer marketing companies around the world. World headquarters are located in Philadelphia, Pennsylvania.

For more information, contact:
Thomas A. Kelly, Senior Vice President – Finance, (215) 698-5341, or
Edward Bisno, Bisno Communications, (212) 717-7578.

Unaudited Consolidated Statements of Operations, Balance Sheets, Statements of Cash Flows, Segment Information and Supplemental Data follow.

 

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Consolidated Supplemental Financial Data (Unaudited)
(in millions)

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Reconciliation from Gross Profit to Segment Income
The Company views segment income, as defined below, as a principal measure of performance of its operations and for the allocation of resources. Segment income is defined by the Company as gross profit less selling and administrative expense. A reconciliation from gross profit to segment income for the three and twelve months ended December 31, 2012 and 2011 follows:

 

 

Consolidated Supplemental Data (Unaudited)
(in millions, except per share data)

Reconciliation from Net Income and Income Per Diluted Common Share to Net Income before Certain Items and Income Per Diluted Common Share before Certain Items

The following table reconciles reported net income and diluted earnings per share attributable to the Company to net income before certain items and income per diluted common share before certain items, as used elsewhere in this release:

 

 

 

 

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SOURCE Crown Holdings, Inc.